BUSF_A01.qxd

Chapter 10 • Cost of capital estimations and the discount rate Warrants are valued similarly except that the returns from the wa ...

11.14 Weighted average cost of capital revisited target gearing ratio. Just under half of these had a ‘flexible’ target. Larger ...

Chapter 10 • Cost of capital estimations and the discount rate assess the cost of capital, it is the future cost that we are int ...

Weighted average cost of capital Note that we used market values rather than the nominal values of the two ele- ments as the wei ...

Chapter 10 • Cost of capital estimations and the discount rate Realities of raising (and repaying) finance and the discount rate ...

Practicality of using WACC as the discount rate amount Ab because sufficient economies of scale as regards the cost of raising t ...

Chapter 10 • Cost of capital estimations and the discount rate therefore, be inappropriate for a project that is either more or ...

Summary figure is stated), it might appear that valuable investment opportunities may be being rejected as a result of businesse ...

Chapter 10 • Cost of capital estimations and the discount rate p 0 is the current ex-dividend price per share, that is, the pric ...

Problems 10.1 What determines the value of an economic asset (as opposed to an asset that has value for reason of sentiment)? 10 ...

Chapter 10 • Cost of capital estimations and the discount rate The current market prices of the business’s shares are: Preferenc ...

Problems 10.6 Vocalise plc has recently assessed a new capital investment project that will expand its activities. This project ...

11.1 Introduction At several points in this book so far we have encountered the fact that most businesses raise part of their lo ...

11.2 Is debt finance as cheap as it seems? In Chapter 2 we found, subject to several assumptions, that financing through bor- ro ...

wealth 11 Gearing, the cost of capital and shareholders’ £1.286). This implies that, were the second vessel to be financed by an ...

Business risk and financial risk profit per vessel falls below £100,000, however, the existence of debt finance weakens the ordi ...

Chapter 11 • Gearing, the cost of capital and shareholders’ wealth La Mer’s ordinary shareholders will only be better off throug ...

The traditional view 11.4 The traditional view The traditional view seems to be that if the expected rate of return from equity ...

Chapter 11 • Gearing, the cost of capital and shareholders’ wealth not see the increased risk to their returns as too significan ...

The Modigliani and Miller view of gearing Since securities (indeed, all economic assets) are valued by reference only to their e ...